2015-11-12 / Front Page

Uber Fights Back

Newport’s Orange Cab and Uber are about to go head-to-head as they grapple with issues around regulation, competitive advantages, and public safety.

The San Francisco-based company Uber, which provides a phone app that connects drivers with riders for a fee, has been operating in Rhode Island since 2013. Uber has requested the dismissal of a lawsuit filed in August by attorney J. Russell Jackson on behalf of Daniel Moriarty, owner of Newport’s Orange Cab and Airport Taxi. The suit claims state regulators have failed to enforce the law, after those same agencies have stated Uber and its drivers are operating illegally.

A hearing is schedule for Thursday, Nov. 19, in Providence Superior Court.

The local cab company objected to Uber’s motion to dismiss and filed its own motion for a preliminary injunction, which, if granted, would prohibit Uber from operating in the state until the case is resolved.

“It’s an extreme request,” said Jackson. “Essentially, the purpose is for Uber to stop operating in Rhode Island until they are regulated.”

Since Uber launched in Rhode Island, the company claims it has “connected over 150,000 Rhode Island visitors and residents with a safe, affordable transportation option and provided over 3,000 drivers with an opportunity to support themselves and their families.”

Unlike taxi companies, Uber is not regulated by state agencies, which critics say creates an unfair competitive advantage and may pose a risk to public safety because of the lack of background checks and gaps in insurance.

Uber claims the opposite on public safety.

“Perhaps most significantly, the public interest would not be served by entry of the requested preliminary injunction,” wrote Uber lawyers in their motion. “Uber has had a well-documented, positive effect on reducing drunk driving.”

Terrence Mercer, associate administrator of the Motor Carriers Section of the Rhode Island Public Utilities Commission (RIPUC), has frequently asserted that ride-hailing companies and their drivers are in violation of state law. RIPUC is responsible for regulating taxi companies.

In a June interview, Mercer told Newport This Week, “[Uber is] providing an illegal transportation service.” When asked why his agency has not enforced the law, he said it was outside of their jurisdiction.

Uber states they are not subject to RIPUC’s regulations because they are a technology company, not a taxi company.

“Like other software companies, Uber does not hold a taxi certificate,” the company wrote in their motion. “It does not itself operate any vehicles, let alone taxicabs.”

Despite this argument, Uber advertises and markets itself as a direct competitor of the taxi industry. The slogan that appears when the app is installed is “Tap a Button. Get Picked Up. Never Hail a Taxi Again.”

Uber also argues the courtroom is not the appropriate forum for this debate.

Last year, the General Assembly created a legislative commission to evaluate the Rhode Island’s Public Motor Vehicle Act, specifically related to ride-hailing companies such as Uber.

“It is likely that in the next legislative session beginning in January 2016, the General Assembly will continue the work begun in the 2015 legislative session, to consider and address the very issue raised in this lawsuit–whether the existing regulatory structure applies, or should apply, to companies like Uber, and whether some other regulatory scheme should be adopted,” Uber lawyers wrote.

Moriarty, who owns the largest taxi company in Rhode Island, said his business has been “significantly impacted” by Uber in terms of lost revenues and business opportunities.

In the summer of 2014, Moriarty spent two hours by a crowded Newport taxi stand and watched Uber drivers pickup and dropoff passengers. The taxicab owner reported registration numbers to RIPUC, which he said issued ceaseand desist letters to the drivers.

Many Uber drivers use their personal cars as a commercial taxi, which is prohibited by state law and punishable by up to a year in jail and/or up to a $1,000 fine.

To operate as a taxi in Rhode Island, companies must go through administrative hearings. If approved, they are limited to operate in certain territories, follow guidelines for passenger pick-ups, adhere to strict regulations on their cars, and pay assessments to the state.

In addition to expenses such as commercial vehicle insurance (which may cost up to $12,000 per taxi), sales tax and licensing fees, the state charges each taxi company that grosses over $100,000 an assessment based on gross sales.

“My client paid an assessment of $26,000 for 2014,” Jackson said.

Uber has not gone through any these regulatory hoops, according to regulators.

For the first 18 months of operating in the state, Uber did not pay sales tax, despite collecting the tax from riders. The company claims it handed money to collectors in April, but has not disclosed the amount paid.

“It’s a $40 billion company,” said Jackson. “That appears to be their business plan. Litigate and fight. Yes, they have been successful at that so far.”

Although Uber declined to comment on the active litigation, a spokesperson told Newport This Week the company will “vigorously defend the rights of our riders and driver partners.”

Uber has a shaky reputation for cooperating with local regulatory bodies.

The city of Austin, Texas, recently proposed a regulation that would require fingerprinted background checks on Uber drivers. Uber fought back with a campaign of television and radio advertisements, suggesting to their customers they would leave the city if the regulation was adopted. Similarly, Uber recently pulled out of three German cities after local regulators pushed back on the company. Chicago cab drivers made national headlines over the last few months when they filed a federal lawsuit claiming their constitutional guarantee of equal protection was violated by unregulated taxi carriers.

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